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03 May

Payment Gateway Vs Payment Processor

By securing all three from the same provider, however, you minimize interoperability issues. Whenever you face an issue, there is only one provider you need to call. Phone or mail order transactions that are manually entered into a virtual terminal. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website.

What is a Payment Processor

Secure Payment Systems offers products, including its Partner Payments subsidiary for credit and debit card payments and ACH payments through the Automated Clearing House network regulated by Nacha. The acquiring bank and issuing bank are members of credit card networks. Credit card companies, including VISA, Mastercard, Discover, and American Express, have proprietary credit card networks. A payment gateway is a fast and secure method for transmitting payment data online. A payment gateway includes card reader devices for point-of-sale and online portal software technology for eCommerce transactions. It’s used to authorize and enable payments from a customer to a merchant or vendor.

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If you’re a higher risk merchant, then you might be subjected to harsher terms like higher rates or processing caps or rolling reserves. It includes expedited card transactions and payment gateways securely transmitting data so money from a customer’s issuing bank can be easily and quickly transferred to the merchant’s account. Online payment processing links a website with a payment processor to connect a merchant account to a credit and debit card issuer. Furthermore, merchant accounts can set up recurring payments, accept or decline transactions according to pre-set parameters, and process payments made with foreign currency. Behind every business, whether it is in-store or online, is a payment gateway and payment processing service providers. They make sure that transactions are carried out seamlessly to enhance customer experience and improve business reputation.

What is a Payment Processor

Thanks to checks, credit cards, and debit accounts, gone are the days when cash was king. While choosing a payment processor, it is important to consider certain things apart from the pricing packages. The first online payment processing company was founded in 1998, first under the name Confinity, which was later changed to, changing again to its current name, PayPal, in 2001. Other technologies that are vital to the payment ecosystem are data security systems and processes, automated functionality, and customer engagement tools. As a result, smaller businesses operated largely off of cash transactions or used off-site checkout solutions like PayPal. When customers click the “Buy” button on your site, they are redirected to a checkout page to select a payment method.

Payment Gateway vs. Payment Processor

The issuer/processor will then send the authorization response through the card network and end up at the merchant terminal with the response back to the cardholder. The whole process takes place in milliseconds – and while it seems simple, the emitter/processor can handle a lot of complexity. After verifying that the transaction information is valid, the issuer/processor authorizes the cardholder to complete the purchase. The journey cannot happen without an existing infrastructure, which is your merchant account or aggregator account. Payment aggregators are licensed with the PCI-DSS, which makes using them safe for both you and the customer. They also have predictable settlements, which is a comfort to most merchants.

  • As a payment processor, not only to the merchant, but also making sure even the issuing bank receives its funds.
  • For instance, when you process a credit card, the payment gateway securely authorizes the payment by encrypting the customer’s sensitive information like card numbers and other account information.
  • The possibilities are never-ending, from confining premium content behind a paywall to providing different payment systems based on customer usage.
  • A payment processor is a company that manages the credit card transaction process, acting as a kind of mediator between the bank and the merchant.
  • Payment processing services are one of the ways you can save your business costs.
  • Gateways can be provided by a business’s bank, or exist as a separate service that connects to one or more payment processors.

Another essential component of payment processing is the payment gateway, which is the software that connects your business to the processing networks. For instance, when you process a credit card, the payment gateway securely authorizes the payment by encrypting the customer’s sensitive information like card numbers and other account information. On the surface, payment processing seems simple, but there’s much more than swiping or tapping debit or credit cards. It includes services like authorization, funding, and settling of a transaction.

Payment Gateway Vs. Payment Processor: What’s The Difference?

After all, every time you take a credit card payment, you’re handling sensitive financial information, so it makes sense to know as much about the process as possible. Understanding payment processing is a significant part of the equation. Find out everything you need to know about third-party payment processors with our simple guide. Some acquiring banks and payment processors might not work with you depending on your business type, so shopping around for the right provider can be a pain. Though working with us is a surefire way to get the merchant account you need.

If the customer’s card is the starting line and your merchant bank is the finish line, the payment processor is the path that connects the two. Next, the processor sends the transaction’s status to the gateway – either approved or denied. The Address Verification Service is used by financial institutions to identify fraudulent or suspicious credit card transactions. Next, the payment gateway verifies your customer’s card details and checks if they have sufficient funds to make the payment. If they do, then the payment gateway proceeds with the transaction.

Introducing Issuing: Launch a card-issuing program without the issues

This explains why payment gateways are essential for eCommerce websites. You’ll need a payment processor no matter which type of business you operate. As a bonus, if you operate a brick-and-mortar store, a lot of payment processors provide POS systems that help you collect credit card information during transactions. The issuer sends the net amount to the acquirer to settle credit card transactions and deposit money into the merchant’s bank account within 24 hours to three days. A payment processor is a company that facilitates communication between the bank that issued a customer’s debit or credit card and the seller’s bank.

What is a Payment Processor

What we’re getting at is that with a merchant account, you have options that work for your business. Offering multiple payment options can help you better meet the preferred payment methods of your customers. Arrayed with this knowledge, you now have all the most relevant information to set up online payments for your business and select the best option for your company. Before you put your finger on the payment processor, ensure your provider is transparent about fees.

Top Payment Gateways

However, as you have the aforementioned things to consider before choosing a payment processor, the job becomes easy. Today, billions of transactions happen within seconds between merchants, processors, card networks, and banks. An in-store terminal, online web interface, or in-office process initiates the transaction. Payment information is sent from the merchant’s processor to the forex payment gateway card network and the issuer’s processor for approval. With so many payment gateway providers and payment processors on the market, it may be hard to make up your mind on the most suitable solution. By understanding the difference between payment processing parties, as well as analysing the available solutions you’ll be able to find a great combo that fits your business needs.


All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly. And dues are paid to the card network, like American Express or Discover. The amount owed is a percentage of the month’s gross sales, with some variance for international sales, whether a transaction was paid with a debit or credit card and other factors.

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